PayPal ordered to disclose business accounts to Canada Revenue Agency

The records of Canadians who use PayPal business accounts to make and receive payments will soon be in the hands of the federal government’s tax-collecting agency.

The online payments company said Wednesday it has been given 45 days to hand over information identifying its account holders and the amount and number of payments they paid or received between Jan. 1, 2014, and last Friday to the Canada Revenue Agency.

“We are required to disclose information about business account holders who have received or sent a payment,” it says on its website. “Affected account holders have been notified.”

CRA spokesman Patrick Samson confirmed that the agency received Federal Court of Canada authorization to request the information, part of a crackdown on Canada’s underground economy.

“Specifically, the CRA is seeking PayPal’s list of Canadian clients who have a commercial account, including the total value of their transactions (purchases and sales) from 2014 to the date of the requirement,” he said.

“The information obtained through the unnamed persons requirement will allow the CRA to ensure that these individuals and corporations comply with their tax obligations under the Income Tax Act.”

PayPal Canada says it has more than 6.4 million active users, although that includes personal accounts which are not affected by the CRA move.

Hussein Warsame, a tax professor with the University of Calgary’s School of Public Policy, linked the data grab to the federal government’s 2017 budget, which provided a five-year funding boost to the CRA to fight tax evasion by investigating the underground economy.

“They think people who use PayPal are probably avoiding tax and therefore they’re using the extra funding to basically look for low-hanging fruit,” he said.

“It is a fishing expedition, in many ways.”

He said the agency is likely offering the 45-day window to allow people who haven’t paid their taxes as required to file tax revision forms and come back into compliance with the tax act.

Warsame said the files could allow the CRA to identify people who have had more than $30,000 in business revenue over 12 months, which means they should be registered to collect and remit the GST.

It also may identify people or corporations who owe corporate or personal income taxes. If caught, they will have to pay the tax, plus penalties and interest. If the tax avoidance is deliberate, it could be considered tax evasion and result in a criminal charge, he said.

He said Canadians are required to retain tax records for six years and recommended that PayPal customers pull together their records to prepare for potential audits.